Keith Hudson's Musings

We could forget about gold as a guarantee of stability

If two businesses were making an identical product out of identical materials, each capable of supplying the world, then only one of them would be making a profit. Because of the imprecise nature of currency exchange between different countries and also the locations of the businesses — with different delivery distances to customers — then both businesses might seem to be making a profit, at least for a while until maximum competition for customers takes place between them. But sooner o later one of the businesses would go bankrupt.

What has been the real difference between them is the method by which they made the product — more exactly, the energy used in each system. The business that used less energy would be the one that finally turned out to be the most profitable but only at the very end when one business palpably failed.

Before that point, the price charged for the product in different countries was flexible and more or less ambiguous. And this is really why economics, as it stands today, without anything that can be a stable unit of measurement, can never be a scientific subject.

But if money, as printed in varying amounts from time to time by different governments, is dis-baring economics from being scientific what can? Energy, of course. Energy is needed when any and every product or services is brought about.

Because energy can be defined scientifically as so many calories, or joules or kilowatt-hours then why not define a unit of currency in terms of how much energy it can buy?. Currencies backed up with the average world market price of gold at any moment would be a commonly agreed unit of measurement that would hardly change from year to year. But then so would a unit of currency defined in terms of the average minimum world price of 1 kilo-watt hour of electricity? We wouldn’t need gold as a guarantee of stability for any currency

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One thought on “We could forget about gold as a guarantee of stability”

The global banking elite will continue to do all possible to prevent fixing currencies to a commodity of any sort. They have some power now to adjust interest rates to defend exchange rates. Also they have the ability to increase the money supply ad infinitum. Few people choose to give up power they already have, even if just a % reduction.